We already knew MetroPCS signed up a lot of subscribers during Q1 to its cheap, all-you-can-eat wireless service: Last month, the company said it attracted 452,000 net new subscribers during Q1, beating the Street’s consensus by 9%. What Wall Street probably didn’t expect: That MetroPCS (PCS) would miss consensus on Q1 revenue and EPS.
The company reported $662 million of Q1 revenue this morning, up 23% year-over-year, but short of the Street’s $664 million consensus. EPS came in at 13 cents per share (before a one-time, 2-cents charge), a penny short of the Street’s 14 cents per share consensus.
Why the miss? One potential factor: The average MetroPCS customer is spending less money each month on service than it did a year ago. The carrier’s average monthly revenue per user dropped to $42.22, 3.5% less than the $43.75 that subscribers spent during Q1 2007. MetroPCS attributes the drop in spending to more people using family plans and certain features that used to cost extra being rolled in to standard subscription plans.
What will lead growth? Selling service in big, new markets. MetroPCS plans to start selling wireless service in Philadelphia during Q4, Boston during Q1 2009, and New York City during Q1 or Q2 2009. But that expansion is driving up the company’s costs: Cost per gross subscriber acquisition jumped to $121.23 per sub, up 11% year-over-year, as the company pushed for growth in Los Angeles, its biggest current market. And construction for the Philly, Boston, and NYC networks pushed up costs, too.
For now, MetroPCS is sticking with its guidance of signing up 1.25-1.52 million of net new subs during 2008 and adjusted EBITDA of $750-850 million.
No meaningful commentary on the call regarding a new bid for Leap Wireless (LEAP), and no gloomy economy-related talk, either.